It’s only natural that many investors, especially those who are new to the game, prefer to buy shares in ‘sexy’ stocks with a good story, even if those businesses lose money. But as Peter Lynch said in One Up On Wall Street, ‘Long shots almost never pay off.’
In contrast to all that, I prefer to spend time on companies like Harsco (NYSE:HSC), which has not only revenues, but also profits. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
Check out our latest analysis for Harsco
Harsco’s Improving Profits
Over the last three years, Harsco has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don’t think the percent growth rate is particularly meaningful. As a result, I’ll zoom in on growth over the last year, instead. Like a firecracker arcing through the night sky, Harsco’s EPS shot from US$0.47 to US$1.28, over the last year. Year on year growth of 172% is certainly a sight to behold.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Harsco maintained stable EBIT margins over the last year, all while growing revenue 3.5% to US$1.7b. That’s progress.
You don’t drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Harsco’s future profits.
Are Harsco Insiders Aligned With All Shareholders?
It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. As a result, I’m encouraged by the fact that insiders own Harsco shares worth a considerable sum. To be specific, they have US$19m worth of shares. That’s a lot of money, and no small incentive to work hard. Even though that’s only about 1.1% of the company, it’s enough money to indicate alignment between the leaders of the business and ordinary shareholders.
Is Harsco Worth Keeping An Eye On?
Harsco’s earnings per share have taken off like a rocket aimed right at the moon. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So to my mind Harsco is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Of course, just because Harsco is growing does not mean it is undervalued. If you’re wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.
Although Harsco certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you’re looking for.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction
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